SARAH GREEN: Welcome to the HBR IdeaCast from Harvard Business Review. I am Sarah Green. Today we’re talking with Eric Schmidt, who was former CEO and current Executive Chairman, and Jonathan Rosenberg, Google’s former SVP of Products. Together, they are the authors of the new book, How Google Works. Gentlemen, thank you both for talking with us today.

JONATHAN ROSENBERG: Thank you very much for having us. It’s a pleasure to be here.

SARAH GREEN: I thought we could just start by talking about– really focusing on the hiring and talent piece of it, which is so much of the book. But I wanted just to start by asking you guys– I know that so much of Google’s talent procedures have been obsessed over in the business press. I thought I would start by asking you to tell us something surprising you think– something that might surprise people to find out about how Google approaches talent and hiring.

ERIC SCHMIDT: I think that there’s been this sort of focus on the metrics. But the system that we built has the capability for exceptional talent to be found even if they don’t follow any rules. Occasionally, we would come across somebody who hadn’t gone to college, and they were just so exceptionally interesting.

They had done something unusual that we figured they would be good to have part of the human resource. And to me, that’s the thing that people don’t recognize. They focus on the metrics and the schools and the GPA and the process. And they forget that at the end of the day, when somebody exceptional came along, we would just hire them.

[LAUGHTER]

ERIC SCHMIDT: And we could just tell.

JONATHAN ROSENBERG: I would say that there’s two things. I think that people don’t realize that, fundamentally, we’re focused on learning animals or generalists as opposed to specialists. And the main reason is that when you’re in a dynamic industry where the conditions are changing so fast, then things like experience and the way you’ve done a role before isn’t nearly as important as your ability to think.

So generalists, not specialists, is a mantra that we have internally that we try to stick pretty closely to. Specialists tend to bring an inherent bias to a problem, and they often feel threatened by new solutions.

The second thing that we do, which we call in the book is “expand the aperture.” And by that, what we mean is you can often find great people who want to do something new, but they’re trapped inside their existing company because no one will give them the chance. You know, a product manager who wants to move to engineering or vice versa. Or somebody who wants to move to another function. So we find those people and give them an opportunity.

SARAH GREEN: Now, you talk a little bit in the book about Google’s approach to recruiting these kinds of people that you’ve just been talking about. But as I was reading it, one of the things I was curious about is, how has your approach, personally to recruiting, changed over time? You know, how have you learned of new approaches that work better and managed to discard the old ones?

ERIC SCHMIDT: Well, for me, the most important thing was sort of the boredom test. In corporate business, there’s an awful lot of people who come to work. They do their work. They do it pretty well. They’re not that interesting. And then they go home. And they always seemed fine to me. You know, it seemed to me like we needed those people. And what I learned at Google is that we don’t want those people.

What we want are what we call in the book the “smart creatives.” And we’re looking for people who have basically some kind of technical capability in some area. It doesn’t have to be programming, but something mildly technical at least. Some kind of business acumen. And curiosity. So a harsh test is what we call, it’s in the book, the LAX test where you’re stuck in the LAX airport for six hours. And after six hours of being with them, do you still like them? Are they still interesting?

SARAH GREEN: [LAUGHS]

ERIC SCHMIDT: By the way, that is a very, very tough test.

SARAH GREEN: That is a tough test.

ERIC SCHMIDT: It’s a very tough test. So if you don’t like that, you can do three hours or pick, you know, Logan, JFK, Dallas, whatever. But the principle is, can they hold your interest? Are they creative or interesting? Or do they have insight? And if they don’t, I just don’t think you should be hiring them. And I learned that at Google.

JONATHAN ROSENBERG: Yeah. I guess I’d say it a different way. I think when I started, I kind of had a formula, right? I’m going to sort of run the CAT scan and look for signs of electrical activity and see what their cognitive ability is like and understand their role-related knowledge and their leadership and that sort of thing.

And what happens is I did so many interviews at Google that it was tiring, and I found myself walking in, just hoping that maybe I’d learn something in an interview. And that helped me figure out how to focus on what people are passionate about. And I ended up getting to that solution by just wanting to learn something in the interview. And I realized–

ERIC SCHMIDT: Did you ask them to teach you something?

JONATHAN ROSENBERG: Yeah.

ERIC SCHMIDT: How did you learn something in your interviews?

JONATHAN ROSENBERG: I learned something by asking them to teach me about a subject that they claimed they were passionate about. And you very quickly then discover if they’re really passionate, they can go on and on and on about a particular subject. And passion, I found, was the one thing I couldn’t teach people. I could teach them the specifics of product management, but I couldn’t teach them passion. So I needed a passion detector.

SARAH GREEN: It’s interesting that you mention the word, passion, because one of the things in the book that struck me is there’s a section in there about how when people use the P word, passion, often, it’s because they’re trying to impress the interviewer, not because they’re actually passionate about whatever it is.

And as someone who frequently talks about how passionate she is for her work, I kind of felt like, oh, oh, actually, wait a minute. Sometimes we do mean it. So how do you hone that kind of instinct to find out who are the people who are actually passionate and will go on and on and on, and then who are the people who are kind of just faking it?

ERIC SCHMIDT: Very few people are good actors long enough that Jonathan’s passion detector fails.

SARAH GREEN: [LAUGHS]

JONATHAN ROSENBERG: But here’s the simple way to do it. You ask a person about a project that they worked on. And ask them about the blind alleys that they went down. If I asked you about the last podcast or article that you did, and how the first write-up of that went, and why you decided to change it, I would know how deeply you thought about it, and I would know the process that you went through.

You couldn’t answer that question for somebody else’s product. You could answer it for yours. And if you went through four or five different iterations, then clearly, you were passionate. And you’d be able to articulate them.

ERIC SCHMIDT: But I did want to add that, you know, you talked about your own passion. And you know, nobody has to order you to get out of bed and go to work. You’re not sitting there counting down the minutes to 5 o’clock, right? You’re busy, right? You’re trying to make a difference. You’re proud of your work. You want to do even better. You’re the harshest critic of yourself. You’re describing a smart creative.

SARAH GREEN: Well, I would certainly hope so. And it sounds like hiring those smart creatives is something that is obviously very important to Google. It’s a key theme in the book. There was a line in the book that actually brought me up a little short. It’s a line where you say that interviewing is actually the most important skill a business leader can develop.

And in a book with a lot of good information on strategy and organizational structure, that’s a pretty bold claim. So I just wanted to ask you, how did you guys come to agree that interviewing actually is this key, essential skill above all other skills?

ERIC SCHMIDT: Well, I would offer the following. I remember one day, early, I realized I didn’t actually know what to do on a bunch of really big, strategic subjects. And the industry was changing. But I realized that I have the smartest people that I could possibly assemble working on these problems.

This had to do with a shift in advertising. I literally just didn’t know what to do. So if you think of it that way, then the most important thing to do was to be to get those kinds of people in those kinds of positions working on that problem.

So management can be thought of as ultimately a people application problem. The right set of people in the right organizational structure asking the hardest questions to solve the hardest problems of growth. Jonathan?

JONATHAN ROSENBERG: I think about it like a coach and a sports team. If you look at coaches and sports teams, they spend all of their time looking at talent. And it’s because it’s so obvious to them once they put the talent on the field, how the talent performs. In management, it’s a little bit more difficult, and it’s a little bit more subjective.

So what happens is people lose their focus on the absolute value of the talent, and they often get sidetracked with things like the urgency of a role. And as soon as you start allowing your teams to do that, then you start hiring people who are just below the current bar.

And then you create the negative dynamic of what we had called in the book “the herd effect,” right? As soon as you let an A hire a B, that B’s going to hire a C, because B’s are threatened by A’s. So you’ve gotta start from the beginning and make sure that you just have A’s who hire A’s.

SARAH GREEN: OK. That’s a great actual segue into the next thing I wanted to ask you. And Jonathan, I think this is probably one where it makes sense for you to start first. One of the things I think is really remarkable about Google is that it’s willing to kill off products that are mildly successful and some products that are even very successful. Like, I’m thinking about Google Reader, Google Wave, other things that launched and had a following.

And I have to think that that willingness to kill things, even that people are attached to, goes back to the kind of people that you hire. So just make the connection for me between that kind of willingness to experiment and fail, and then the hiring process we’ve just been talking about.

JONATHAN ROSENBERG: Well, I think that when you hire really passionate people, that’s correlated with great persistence. And people who are super persistent can power through failures. And they’re also the kind of people who exhibit the kind of high exceptionalism where they really want to do great things.

And the way we evolved with them was a process that we sort of called “feed the winners, starve the losers.” And the best products, the most successful products got more resources, because we’re in a world now where you have significant network effects and where as something starts to win, it garners more and more resources.

So you want these kind of people who are not just focused on being able to say they did x or y, but rather that they did the best x or the best y in the world. And to do that, you have to prune the ship of the subset of things that aren’t likely to be great.

SARAH GREEN: So whenever we at HBR hold up Google as an example of something to emulate, like that, I’ve noticed that people will sometimes push back and say, that’s all well and good for Google to do. They’re Google. But I work in this bigger, more bureaucratic established company, and I cannot implement that. We’ve got legacy systems, legacy hires, and that just won’t work for us.

Is that a piece of feedback that you’ve ever gotten? And how do you sort of answer that charge, like, it’s all well and good for you guys, but that won’t work for me?

ERIC SCHMIDT: Well, you know, we hear this all the time. And this is why we wrote the book. So let’s talk about an existing old company. Is it hiring people? Of course it is. Even if it’s not growing its headcount, there’s enough turnover.

The average American company loses something like 5% or 10% of its employees every year, right? So they’re going to hire some number of thousands of people. They could clearly change their hiring processes in the way we describe in the book. And over some years, right, it would materially change the culture.

You could also change the way strategic decisions are made, to be more inclusive and more technically definitive. You could again, at a relatively low cost, start some new product ideas and new areas of innovation. We say in the book, the CEO needs to be the Chief Innovation Officer, right?

That innovation and, in particular, new products are the core things that the company needs to do, because the other ways of holding on to power, you know, brands and distribution networks that you control are falling by the wayside because of the multiplicity of assets and globalization. More money for everybody, more internet, et cetera.

JONATHAN ROSENBERG: I think there are some valid criticisms there, particularly with respect to larger old-line companies. I think it is difficult, for example, to change your culture. And it may be difficult to be able to garner the resources to invest in the kind of moon shots that Google likes to focus on.

But changing hiring practices is something anyone can do. Running a fundamentally different approach to decision-making, being much more transparent in the way a company communicates, and, as Eric said, having a CEO that is absolutely focused on innovation is something that any company can do.

ERIC SCHMIDT: Well, let me give you another example. We have a recorder take the presentations that were given to the board of directors, and we show them to every employee in the company in order to promote communication. And we have a huge disclaimer about, it’s private information, don’t leak it, that kind of stuff. We’ve never had a leak.

SARAH GREEN: In a company of 45,000 employees, that’s very impressive.

ERIC SCHMIDT: But it works.

SARAH GREEN: OK. So then the other sort of part of this question is, kind of how much of what you guys are talking about in the book– new, and radical, and different? And how much is kind of back to first principles? Because I noticed that a lot of it is sort of new and different. And that’s why we get questions like the one we were just talking about.

At the same time, I think in the introduction, you have, like, two Peter Drucker quotes. And he is someone who is definitely a first principles kind of guy. So tell me where you think you fall on that spectrum.

JONATHAN ROSENBERG: Sure. This Jonathan. I do think that the knowledge worker principles that Drucker espouses are reasonably similar to what we cover. I think what’s different is that knowledge workers in Drucker’s world tended to be highly specialized and tended to be lower down in the organization.

I think the main things that we’re talking about that are fundamentally different is the speed with which the world is moving. And we’ve defined this set of smart creatives as people who can prototype, who can use the tools of the new age to produce product functionality, and get it into the market much, much faster. So they’re not working under the same type of structured planning that knowledge workers were in Drucker’s time.

They’re combining their vision of business, their technical ability, and their creativity all together much more expeditiously in a prototype that they can get out to their colleagues, and show within their organization, and then manifest itself in a product in a much shorter time frame.

ERIC SCHMIDT: You also, Jonathan, have a Friedman quote about competition, that basically everyone always misses the fact that competition doesn’t have to be a zero-sum, that building an ecosystem can benefit many, many corporations

JONATHAN ROSENBERG: Yeah. Milton Friedman said, most economic fallacies are derived from the fact that people look at the pie as fixed. And if you look at most of the markets that we’re in, these are markets that are growing very, very fast. And the way Hal Varian articulated it in Information Rules is that the value that is derived to affirm from some new innovation is equal to the increase in the total size of the industry times their share in the industry.

But if you look at that and ask yourself, which is more important, increasing the size of the industry by 10% or increasing your share by 10%, the answer is increasing the industry by 10%, because that brings a whole bunch more developers to grow the industry with you.

SARAH GREEN: OK. This is great. And we’ve gone all the way from hiring people to growing the entire industry by 10%. I love that. Now I have one more question, which is which one of you is the Star Trek fan and is thus responsible for the hilarious joke about the Borg on page 107?

ERIC SCHMIDT: We’re all Star Trek fans.

SARAH GREEN: Ah, it’s a dream come true. I’m someone who grew up watching TNG and taping every episode on VHS tape when I was growing up. So when I got to that joke, I was like, these are my people! [LAUGHS]

ERIC SCHMIDT: Oh, how funny.

JONATHAN ROSENBERG: We can go into detail on “Trouble with Tribbles” and Gorns any time you’d like.

SARAH GREEN: [LAUGHS] Excellent.

ERIC SCHMIDT: Oh, how funny. And it’s funny how a whole generation of people were all attracted to that and then ended up being successful in what they do. So the Star Trek path to success.

JONATHAN ROSENBERG: Do you remember in Star Trek we had the tricorder?

SARAH GREEN: Yes.

JONATHAN ROSENBERG: What did it do? It measured meteorological data, it measured geological data, it measured physiological data. And then we had a separate device that was called the communicator. Today we have a smartphone that accomplishes what both of those devices did. If only my smartphone could do the job of a phaser, I’d have all three.

[LAUGHTER]

SARAH GREEN: Well, maybe that can be the next big Google project. Gentlemen, thank you again so much for coming in today.

JONATHAN ROSENBERG: Oh, absolutely. Our pleasure.

ERIC SCHMIDT: Thank you so much for having us.

SARAH GREEN: That was Eric Schmidt and Jonathan Rosenberg boldly going where no HBR IdeaCast has gone before. For more, visit hbr.org.